February 2014
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OEM vs. Third Party Service

What the Owner needs to look out for and careful considerations for their benefit.

Todd Fiinnegan
Todd A. Finnegan,
President
ACS Services, LLC
TFinnegan@acssllc.com

TechTalk
January 2014 - Vol. 10


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Let’s begin with full disclosure. I own and operate a company that performs THIRD party service to critical equipment AND outsourced OEM service for several manufacturers. I’ve also worked for a few VERY large OEM’s.

Since I’ve been on both sides of this issue from the service provider’s perspective, my discussion will be about what the Owner needs to look out for in terms of several factors and offer careful considerations for their benefit.

LOCATION:

Large OEM service organizations are set up to cover the globe. They have field operatives working out of their homes and are dispatched from a central location that may be far from your site. THIRD party service organizations with a few exceptions are more local and may have a higher concentration of Technicians within your region. Check the choices for Service Level Agreements (SLA’s) and see what choices you have for response time. It can give you a sense for how close to your site the concentration of Technicians is. You need to know and understand how quickly your service provider can get there when you need them and who will be doing the work.

Consider how quickly you can get someone on site. Emergencies are a fact of life in critical equipment. How quickly can you get the Tech in to make the repair when you need it most?

PARTS:

Access to parts in OEM and THIRD party service organizations is never easy. Large OEM’s usually distribute their parts from a centralized location and their field operatives and customers have first priority for getting the parts shipped.  THIRD party service organizations have to stock the typical parts needing replacement in a local warehouse. Since the THIRD party organizations deal with several manufacturers they need to keep a lot of parts on hand or have good contacts with the OEM’s to get them sent quickly. If you operate a large site consisting of one brand of OEM equipment, knowing that your OEM service company has fast access to these parts is important. Often there is a shipping lag for even the OEM’s since not every part is always stocked. THIRD party service organizations should have a good supply of typical “wear and tear” parts for your equipment on the shelf within your geography, but “special” parts like control boards may need to be sourced from the OEM. Both OEM and THIRD party companies have issues stocking parts inventory, it’s expensive, and raises the cost of doing business.

Consider the type of equipment you have, how critical it is and the parts that are most crucial. Have a discussion with your service provider about how quickly you can get these parts.

EXPERTISE & CONSISTENCY:

OEM Service staffs are populated with Technicians that are factory trained and work on one and only one manufacturer’s equipment. THIRD party service staffs are populated with Technicians that got most of their training while they were employed by OEM’s. OEM service companies still need to match the staff with the equipment, since their product lines may be fairly extensive. Both service companies must do the best job matching the skills sets of their staff to the customer’s equipment to provide a smooth service cycle and consistency of work product. It’s a constant struggle and geographical distinctions matter. One region of an OEM organization may be simply stronger than another (New York City vs. Topeka Kansas for instance). THIRD party organizations have to support a variety of manufacturer’s equipment in a concentrated area and need to constantly add new technical talent to service their customer base. A new Technician to your site every time is a drain on your time and creates issues for the next Technician through the door. You don’t want a learning curve for every Tech on every service visit whether an emergency call or a typical preventative maintenance visit.

Consider the expertise of the staff that will be committed to your site AND IF the service company can commit particular Technicians. Consistency matters greatly especially in an emergency.

PRICING:

We’ve covered the fact that OEM’s are large organizations and THIRD party companies are often local and smaller. The overhead structures and the utilization rates (how busy) of the Technicians will often determine the pricing structures. OEM rates can be 20-25% higher than THIRD party rates. It’s not a rule, just an observation of mine being in the business so long. Also, the flexibility of the service organization with regard to what type of service you get is often extremely variable as well. OEM’s need to follow strict procedures on what their parent company dictates needs to get done for every visit without regard to your budget and determination of the equipment’s age, importance and life cycle. THIRD party organizations still MUST adhere to the manufacturer’s guidelines. If the equipment is out of warranty and is at the end of life, you may not want to invest the capital for services that are deemed “necessary” by the OEM. THIRD party organizations will have more flexibility in determining WITH you what is “necessary” and what is not on a case by case basis. If the equipment is still under warranty, there should be no difference between what the OEM and the THIRD party service company offers otherwise the warranty will be voided.

Consider how critical the equipment is to the stated mission of your company. Further, consider where the equipment is in its life cycle and what is truly necessary vs. recommended for the service investment.

CatNet Systems PEACE OF MIND:

What are the things you are absolutely not willing to sacrifice? What is this worth to you and your company? Who makes you feel the most “comfortable” and “valuable” as a customer? OEM’s often have literally thousands of customers. THIRD party companies often wish they had thousands of customers. Checking the references of any company that will service your equipment is a GREAT idea. Make sure your service provider can demonstrate a track record of solid customer satisfaction. Larger and more expensive does not necessarily mean better and smaller and less expensive does not mean less value. The company that services your equipment needs to understand that you have choices. OEM and THIRD party service companies have to co-exist and the fight for your business should make them better and value your business more. The image of waiting in line at the Deli counter of “take a number” won’t work in today’s competitive service environment.

Consider the service company’s record of customer satisfaction with similar companies and equipment to yours. Make sure you are not just a number. When you call you should feel like their ONLY customer.

Competition makes all the participants in this seemingly Darwinian equation better. OEM’s and THIRD party service companies all have their place. Even though we each might not like to admit it, we each benefit from the other company’s existence. You have to step up your game if there is someone out there that can do it faster, cheaper and more consistently….otherwise you end up like the short-necked giraffe’s…..extinct.

That’s all for now and always remember, us SERVICE GUYS don’t care how large or small the job is, we just want to be the call you make!

Regards,
Todd


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